Credit card balances increased modestly in June, making it the
fourth straight month of rising card debt, the Federal Reserve said
Revolving debt rose at a 1.3 percent annual pace in June,
slowing a bit from a revised 2.4 percent pace in May, according to
the Federal Reserve's preliminary
G.19 report on consumer credit
. Revolving debt is predominantly composed of credit card
This modest increase comes on top of April's vigorous and
current unrevised 12.3 percent balance increase -- the highest
growth rate since 2001.
Total short-term consumer debt went up 6.5 percent in June. The
total figure includes car loans, student loans and revolving debt,
but excludes mortgages. In dollar terms, total consumer debt was
$3.2 trillion, of which $873.1 billion was revolving debt.
Consumer spending increased by $51.7 billion in June, or about
0.4 percent after a revised $57.4 billion increase in May,
according to the
Average student loan debt is approximately $1.27 trillion,
according to the Fed report, compared to $1.26 trillion in March,
the last time these debt figures were measured. Outstanding auto
loan debt totals about $918.1 billion, compared to $892.2 billion
These two particular debt segments don't always reflect trends
occurring in other areas -- such as credit card balances -- because
credit activity can vary greatly between industries, according to
Scott Hoyt, a senior economist for Moody's Analytics.
"Auto loan lending has accelerated as demand has picked back
up," he said. "Student loan growth, though still strong, is
moderate as demand slows. It remained very strong through the
recession." Since access to student loans remained easy, "More
people chose education over the weak job market," he added.
Recession rebound slow but steady
Consumers may be spending again, but they aren't doing so at a
Credit card debt, although up, still remains below pre-recession
peaks, reflecting a sluggish recovery that can be attributed to
all-around financial constraints, according to Hoyt.
"It's not that consumers don't want to spend, it's that they
don't have the money," he said. "Growth in income and credit
availability has been limited and a lot of that has to do with
lenders and their willingness to issue credit to consumers.
According to the Federal Reserve's latest
senior loan officer survey
, consumer lending standards were primarily unchanged for new card
applicants in the second quarter. Since 2005, a majority of
surveyed banks have kept card growth in check, especially for
subprime credit consumers. Tight credit issuing standards makes
consumers who may be willing to buy on credit unable to do so.
Job growth, while still positive, has also slowed. Employers
created 209,000 jobs in July, leaving
hardly changed at 6.2 percent from 6.1 percent in June, the Labor
Department said. Additionally, average personal income only rose
0.4 percent last month, according to the Commerce Department.
Earlier post-recession high unemployment rates and lower wages
took a toll on how much money consumers put back into the economy,
specifically for discretionary service expenditures such as
recreation, household utilities and food services, which dropped
drastically in 2008.
While spending in this area has been on the rise, current levels
are still far below what they were before the recession, according
by the Federal Reserve Bank of New York.
But, so long as employment continues to improve, more pressure
will be created for increased wages and higher consumer credit
balances will follow, according to Hoyt.
"It's all a cyclical phenomenon," he said. "As the labor market
tightens and the credit market picks up, we should see more
discretionary spending, but that will be a gradual process. Don't
expect any big changes in the next three to six months, but rather
in the next year or two."
Despite the all-around slow financial recovery, consumers remain
optimistic going into the third quarter of 2014.
The Conference Board
Consumer Confidence Index
showed a continued upward trend in July, rising to 90.9 from 86.4
in June, indicating consumers still hold positive outlooks for the
employment market, business growth and personal income.